{"id":8927,"date":"2024-11-03T12:59:29","date_gmt":"2024-11-03T12:59:29","guid":{"rendered":"http:\/\/&p=8927"},"modified":"2024-11-03T12:59:29","modified_gmt":"2024-11-03T12:59:29","slug":"the-not-so-friendly-side-of-friendly-fraud-what-businesses-need-to-know","status":"publish","type":"post","link":"https:\/\/pa.outright.co.il\/fibonatix\/the-not-so-friendly-side-of-friendly-fraud-what-businesses-need-to-know\/","title":{"rendered":"The Not-So-Friendly Side of Friendly Fraud: What Businesses Need to Know"},"content":{"rendered":"\n

Picture this: A customer places an order from your online store. You process the payment, ship the products, and everything seems to be going smoothly. But then, after receiving and using the items, the customer decides they want a refund. Instead of reaching out to you, they dispute the charge with their bank, claiming they never made the purchase or that they didn\u2019t receive the goods or services.<\/p>\n\n\n\n

This is a prime example of friendly fraud<\/strong>\u2014when a legitimate cardholder makes a purchase but later disputes the charge, falsely claiming it was unauthorized or that the product or services weren\u2019t delivered. Unlike criminal fraud<\/strong>, which involves stolen payment information, friendly fraud usually occurs due to misunderstandings, unintentional actions, or buyer\u2019s remorse.<\/p>\n\n\n\n

But how does friendly fraud differ from criminal fraud? Let\u2019s take a look:<\/p>\n\n\n\n

 <\/strong><\/td>Friendly Fraud<\/strong><\/td>Criminal Fraud<\/strong><\/td><\/tr>
Cardholder<\/strong><\/td>The actual cardholder makes the purchase but later disputes it.<\/td>A fraudster uses stolen payment details to make the purchase.<\/td><\/tr>
Intent<\/strong><\/td>Sometimes unintentional (e.g., buyer’s remorse, confusion), but can often be intentional when buyers exploit the dispute process.<\/td>Always intentional, with the aim to steal money or goods.<\/td><\/tr>
Common Causes<\/strong><\/td>Forgotten purchases, unclear billing descriptors, family use, buyer’s remorse.<\/td>Hacking, phishing, stolen card details.<\/td><\/tr>
Business Impact<\/strong><\/td>Revenue loss, chargeback fees, reputational damage, operational costs, and risk of account termination.<\/td>Revenue loss, chargeback fees, reputational damage, operational costs, and risk of account termination.<\/td><\/tr>
Resolution Process<\/strong><\/td>Better chance of recovering disputed funds.<\/td>Recovery is typically more challenging.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

While it may seem harmless to the customer, the impact on businesses can be significant. Lost revenue, chargeback fees, and operational costs add up quickly. Friendly fraud now accounts for up to 75% of all fraud-related chargebacks<\/strong>, particularly in online and digital industries. Part of why it\u2019s grown so quickly is that customers face little consequence for disputing legitimate charges, whether they claim they didn\u2019t make the purchase or never received the goods.<\/p>\n\n\n\n

According to industry reports, global losses from friendly fraud now exceed $25 billion annually. As online shopping continues to grow, friendly fraud has become a major challenge for merchants across industries, from retail to subscription services.<\/p>\n\n\n\n

How Friendly Fraud Impacts Businesses<\/h2>\n\n\n\n

When a customer disputes a legitimate charge, you lose the sale\u2014and face chargeback fees. Over time, these losses can add up, particularly for businesses using traditional payment processing<\/strong><\/a> <\/strong>services.<\/p>\n\n\n\n

It\u2019s not just the financial hit. Friendly fraud puts extra pressure on customer service teams, who spend time handling disputes and managing chargebacks. Worse, proving friendly fraud can sometimes be challenging, meaning businesses often have no choice but to absorb the cost.<\/p>\n\n\n\n

Common Causes of Friendly Fraud<\/h2>\n\n\n\n

So, what causes friendly fraud in the first place? In some cases, it\u2019s simply a matter of confusion\u2014customers might not recognise a transaction on their bank statement, especially if the billing descriptor is unclear or doesn\u2019t match the store name.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Sometimes, family members use a credit card without permission, leading to unintentional disputes. For example, children may make purchases on a parent\u2019s device without realising the cost, prompting the parent to dispute the charge later. Subscription services can also be a source of friendly fraud; customers might forget about auto-renewals and dispute the charge instead of cancelling.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

But friendly fraud isn\u2019t always accidental. Some customers exploit the chargeback system intentionally, seeing it as an easy way to get products or services for free, believing there will be no repercussions. This misuse is particularly common in digital and subscription-based businesses, where customers may dispute charges even after fully using a service.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Strategies to Reduce Friendly Fraud<\/h2>\n\n\n\n

Luckily, there are some practical steps you can take to get ahead of friendly fraud. It starts with something as simple as using clear billing descriptors that match your store name, so customers can easily recognise charges and avoid confusion.<\/p>\n\n\n\n

It\u2019s also important to educate your customers about your return and refund policies\u2014when they know their options, they\u2019re far less likely to jump straight to filing a dispute.<\/p>\n\n\n\n

To make sure your business is covered, here\u2019s a quick checklist of key actions to help you reduce friendly fraud:<\/p>\n\n\n\n